If you're considering a loan from a pawn shop, the Better Business Bureau has the following tips:
Do your research. Do some online research to see what others have said about working with area pawn shops. Then, choose a reputable shop and broker you feel comfortable with. To research pawn shops in the area visit www.bbb.org
Know the value of the item in its existing condition before you make a purchase.
Negotiate. Pawn store owners are resellers, not collectors. Set a minimum price ahead of time so you don’t make a quick decision you’ll regret later.
Know if you want to pawn or sell. Pawn shops may give you the choice. The decision should be based on a number of things including your ability to repay a loan and the value you place on the item you are pawning or selling.
Bring items in good condition. Polish jewelry and dust or clean the items you are looking to pawn in order to help make them more attractive to the shop.
Consumer experts also offer the following advice:
Shop around. When possible, visit more than one pawn shop to find the lowest interest rate for a loan or the best price for your item.
Compare interest rates. Interest rates and fees on loans are capped or limited in practically every state. Generally, you can expect to pay anywhere from 3 to 25 percent in interest on your loan.
Ask about extensions. If you can't pay back your loan in time, ask the pawn shop for a time extension, but be prepared to pay more fees and interest.
Get an appraisal. For items that may be valuable, consider getting a professional appraisal. You will have to pay for the appraisal, but you will gain important information.
When using an online service, be sure to understand the terms and conditions. Make sure the package will be insured and take photos of your items before sending.
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One of the items that was not pointed out in the segment was that even the interest on the loan can be extended and that any extra funds on top of the interest paid will lower the next pmt and redemption amount so you can break it down just like you would a credit card whom charge a nineteen to twenty percent interest. So support your local pawn shops as they will always be there to support you and will never turn you away.
I realize that the report your did was about pawn shops, however, I think you used a very poor example. In my opinion the pawn shop owner wasn't doing anything wrong. The thing that sounded wrong to me was that the couple being interviewed thinks it was the "economy" that was their downfall and now we are supposed to feel bad for them that they are broke and jobless and have to pawn their jewels. All I saw was a couple who built a big business in a short time and thought it was going to last forever. It appeared to me that they were living way beyond their means and that is why they are broke. Based on what I heard, I have no sympathy for them and the only thing the economy did to them was to teach them to live within their means. The pawn shop owner may be capitalizing in a market where most people are hurting but many of the people hurting had their high time too. Considering what credit card companies get away with, I think the pawn shop owner is fair and reasonable and offers people an opportunity to get the help they need and hopefully get their valuable possessions back at some time in the future. People cannot walk into a situation with open eyes then blame someone else when they don't get the outcome they had hoped for.
I don't feel sorry for that couple either and they are a bad example of struggling Americans. It seemed like they were living way beyond their means. Why would they have to pawn jewels when they are driving a brand new quad cab 1 ton truck that is probably worth $50,000? Couldn't they sell that and buy something more sensible to drive?
Another aspect of high interest lending is the hard money loan for buying a house. We were forced to short sale our home ( a 3 acre horse property) and rather than pay high rent we have purchased a smaller home using a hard money lender. This requires 30% to 40%down and interest is 12% BUT in 3 years we will be able to refinace and will have benefited from the upswing in the housing market in Phoenix. Old house was orginally listed for $1.3M and sold for $525K - new house $220K and is a 4 BR with a great yard, gourmet kitchen and is in a great neighborhood. The sellers short saled as they purchased the home for $400K. This was an affordable option for us and lessens the pain of loosing our home. (However, the lenders have started doing no default short sales which allows the seller to get a FHA loan if they had no late payments. FHA loans require 3.5% down and interest is 4.5%.) Something has to allow homeowners to turn their lives around
I would not say that the couple was living beyond their means. During the peak of their business, they could afford everything and still set aside money in their savings. When the customers went away, their savings were drained trying to keep the business afloat.
They believed in the "too big to fail" myth and expanded their business without considering the future. Fixed operating expenses have to be paid when business slow down.
10 cars is not beyond their means? Savings/economy crash or not, that is excessive.
I agree with Jadetres. I have no problems or hesitations with the wealthy spending and enjoying life and luxury - in fact it drives consumerism and the economy benefitting us all. That being said, there are limits to all things, and especially the purchase of ten cars and a boat - assets that rapidly depreciate - is very poor financial planning. The more you make, the more you can spend BUT the more you can also save! I wish this couple the best and hope they recover, but I do hope some viewers saw this story and realized the value of long-term savings and investments that appreciate and have varying degrees of security.
Kate Snow indicated the pawn shop charged 6% interest on each of the first three months. She indicated that would be a total of 18%. However, 18% for three months is an annual percentage rate of 72%!! Your credit card interest rate is a much better deal. It is easy to see why the pawn shop owner wants to see you pay off your loan and continue to come back. It is very misleading not to bring out the true interest rate.